SACRAMENTO, Calif. – Artur Schaback, 36, of Tallinn, Estonia, the former chief technology officer of virtual currency platform Paxful Inc., admitted today to knowingly turning his company into a playground for criminals. Schaback pleaded guilty to conspiracy to willfully fail to establish, develop, implement, and maintain an effective anti-money laundering (AML) program, a direct violation of the Bank Secrecy Act.
Court documents reveal a calculated disregard for financial regulations between July 2015 and June 2019. Schaback actively fostered a system where users could open accounts and trade on Paxful without providing basic identification – no ‘know-your-customer’ (KYC) checks were performed. Worse, Paxful was marketed as a haven for those seeking anonymity, effectively waving a flag for illicit activity. Schaback didn’t just fail to prevent crime; he actively courted it.
The deception didn’t stop there. Schaback presented fabricated AML policies to concerned third parties, knowing full well that those policies weren’t actually in place. Crucially, not a single suspicious activity report was filed, despite glaring evidence that Paxful users were engaged in a wide range of criminal enterprises. This wasn’t negligence; it was a conscious decision to prioritize profit over compliance.
The consequences of Schaback’s actions were far-reaching. Paxful became a conduit for money laundering, sanctions violations, and a host of other crimes including fraud, romance scams, extortion, and even the trafficking of human beings. The platform was weaponized by criminals looking to exploit the anonymity of virtual currency to fund their operations.
Schaback is scheduled to be sentenced on November 4, 2024, by U.S. District Judge Kimberly J. Mueller. He faces a maximum penalty of five years in prison. The final sentence will be determined based on statutory factors and Federal Sentencing Guidelines. As part of the plea agreement, Schaback will also resign from Paxful Inc.’s Board of Directors – a small consolation for the damage already done.
The investigation was a joint effort by Homeland Security Investigations and IRS Criminal Investigation. Principal Deputy Assistant Attorney General Nicole M. Argentieri, U.S. Attorney Phillip A. Talbert, and Acting Special Agent in Charge Michael Mosley of IRS Criminal Investigation Oakland Field Office all announced the guilty plea. This case is part of a larger Organized Crime Drug Enforcement Task Forces (OCDETF) operation aimed at dismantling transnational criminal networks. The prosecution was handled by Trial Attorneys Emily Cohen, Victor Salgado, and Caylee Campbell of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), and Assistant U.S. Attorney Matthew Thuesen.
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Key Facts
- State: California
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes|Cybercrime|Organized Crime
- Source: Official Source ↗
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